Should Netflix Worry About Hulu Going Public?

An investor-owned Hulu would pose a credible threat to Netflix -- but that's not necessairly a bad thing.

Investing in digital video has so far been a rather simple strategy: either you buy Netflix(Nasdaq: NFLX) and Amazon.com(Nasdaq: AMZN) because you like their media strategies, or you don't. Apple(Nasdaq: AAPL) could be considered a third option, but that basket is stuffed full of hardware operations that have little to do with the online video market.

That small, elite cadre is getting some company. According to Reuters informants, streaming TV specialist Hulu is planning to go public in 2011, instantly widening your investment options. Making money from online video is hard work -- even leading clip service YouTube is assumed to lose money (incorrectly, in my opinion). The industry needs to find its collective sea legs, and shoving Hulu into the publicly traded waters to see whether it'll sink or swim could go a long way toward accomplishing exactly that.

Current Hulu backers including News Corp(NYSE: NWS), private equity firm Providence Equity Partners, and General Electric's (NYSE: GE) media arm NBC Universal are probably getting tired of pumping their capital and content into Hulu, and they're undoubtedly ready to hand financing duties over to investors. While we won't get to see what Hulu's balance sheet or cash flows look like until the company files registration statements with the SEC in a couple of months, it's a fair bet that we're looking at roughly breakeven operations and bare-bones cash balances.